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I know when drag racing its better to use something with a manual transmission because you can squeeze more power out of that, but for drifting which is better?  I would think automatic cause then you wouldn't have to worry about stalling when sliding, but I've heard others say that they would prefer manual.  Which would be better?  

Drag racing really isn't my thing, but I can tell you that almost all of the street driven muscle cars guys are using autos.

For drifting you definitly want a manual. You want to be able to get all your power to the ground, plus the torque converter stall would just kill you. You could be sliding and you try to lift just a little and the TC starts spinning and you start coasting instead of what you intended to do, then you get back into it and your RPMs shoot up before the TC locks again and your putting down way more power than you wanted. Plus a lot of drifters use a clutch kick, which as it sounds, is popping the clutch to throw your weight forward onto the front wheels as well as snapping the rear tires loose with power.

Now if you could use something like a DSG, that might work pretty well. It shifts so fast and doesn't have the TC lag.  

The only reason you would want an automatic is if you were playing grand turismo 3.

F-ing game makes me spin out so much arg >_<  

drag racing times are faster with an auto, no matter how fast a human can step on the clutch and shift with their hand, the auto will shift faster, also with constant throttle applied.

for drifting a manual is a must.  the highly demanding skill level requires the driver to have complete control over the car (ie gear selection)  there are also techniques used to initiate drifts that can only be done with a manual - clutch kicks, shift locks, etc.

clutch kicks are huge, if you watch D1 at irwindale or a similar high speed circuit, you can actually hear every driver kick the clutch to initiate the first long sweeping drift.

if you wanna get really crazy, kazama's s15 silvia uses a hollinger sequential, giving even more control over the car
- http://www.freshalloy.com/site/features/events/2006/D1drift/photos/002.jpg
(yes he actually drifts like this for show, absolutely insane)

i guess with an auto, the only drift techniques you could use are power over (just floor it to induce oversteer), feinting (swerve one way then to the other using weight transfer to break loose) oh and basic e-braking.  the power delivery wont be as consistent though